Where has the FSA’s leadership gone?

There once was a time when the UK’s Financial Services Authority (FSA) had quite a reputation in op risk. The regulator had grudging respect from the industry – it was named ‘Regulator of the Year’ in March in our Operational Risk Achievement Awards .

This was based on the work it had undertaken in 2002 and early 2003 – it had formed an industry working group, drafted credible best-practice guidance on op risk management systems and controls, and produced a substantial volume of thought on the subject. Indeed, it is fair to say the FSA and the UK’s financial services industry worked hand-in-hand to shape the op risk capital charge in a meaningful and lasting way.

But now, the FSA’s reputation is in tatters. This month, it decided to ditch the op risk systems and controls document – less then four months before the implementation deadline. The head of op risk policy, Colin Tattersall, is departing. And the FSA has been distressingly vague about the shape the AMA approval process is going to take.

Although some bankers and association officials insist the FSA has turned the corner, others are less sure. They are worried, and perhaps rightly so. If the FSA treats op risk in such a slap-dash manner, how can they expect senior management at their own firms to give the subject the respect their salaries and budgets are so dependent on?